Michael McGrath (Cork South Central, Fianna Fail)
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Question 140: To ask the Minister for Finance when the return of income form 12 for 2011 will be available from the Revenue in view of the fact that many pensioners are being advised to complete the form and it is not yet available. [7560/12]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by the Revenue Commissioners that the 2011 version of the Form 12 is currently being finalised and should be available very soon. This is in line with the usual timetable for the production of the form. In the meantime, if a taxpayer wishes to complete a return of income for 2011 they should contact their local Revenue office where they will be issued with an adapted version of the 2010 Form 12 for that purpose. However, they will not be disadvantaged in any way by waiting for the correct form. I am further advised by the Revenue Commissioners that they are currently developing a significantly shorter version of the existing Form 12 specifically to cater for the needs of pensioners and other PAYE taxpayers whose tax affairs are more straightforward. The intention is that a draft of the short Form 12 (Form 12S) will be circulated to a range of groups representing the elderly and other pensioners for their views on the layout of the proposed new form, its suitability and ease of completion. It is Revenue's intention to complete the consultation process as quickly as possible and to have the Form 12S available for completion as a matter of urgency.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Question 141: To ask the Minister for Finance if he will consider a special higher tax rate for those in receipt of retirement packages greater than €200,000.00. [7609/12]

Michael Noonan (Limerick City, Fine Gael)
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It is not clear from the question whether the Deputy's reference to "retirement packages" is to retirement lump sums or to the combination of lump sum and pension. An individual in receipt of pension income is liable to tax on that income at his or her marginal rate of income tax. I have no plans to change these arrangements. I am informed by the Revenue Commissioners that two separate tax treatments can apply to lump sum payments depending on the nature of the lump sums paid to a retiring individual. (These rules apply equally to all employees – public and private sectors). The details of these treatments are set out hereunder. It should be noted that the lifetime limits on the amounts of lump sums that can be paid tax-free under pension arrangements or as termination payments were reduced to €200,000 in last year's Finance Act. I have no plans for further changes in this area at this time.

Retirement lump sums paid under pension arrangements

The following arrangements apply to retirement lump sums paid under Revenue approved pension arrangements:

· Lump sum amounts up to €200,000 are paid free of tax. They are also paid free of Universal Social Charge (USC).

· The portion of a lump sum between €200,001 and €575,000 is taxed on a ring-fenced basis at 20%. (This means that no tax credits or other tax reliefs can be set against this portion of the lump sum.) No USC is chargeable.

· Any amount of a lump sum in excess of €575,000 is taxed at the individual's marginal rate of tax (credits and other tax reliefs are available). In this instance, USC is chargeable on the excess.

These amounts are lifetime amounts with prior lump sums aggregating with later lump sums.

Termination lump sums

Section 201 of the Taxes Consolidation Act 1997 and Schedule 3 to that Act set out the legislation in relation to the exemptions that apply to ex-gratia payments including retirement gratuities, and the taxation of any balance after applying these exemptions. The same rules apply to all employees and office holders in receipt of ex-gratia payments.

Statutory redundancy payments are exempt from income tax. In addition, there are additional exemption limits for ex-gratia redundancy payments or retirement gratuities in excess of the statutory redundancy amount, namely -

· a basic exemption of €10,160 plus €765 per complete year of actual service in excess of the statutory redundancy payment;

Or

· Standard Capital Superannuation Benefit i.e. 1/15th of the person's annual income (average of the last three years) for each year of employment less any tax-free lump sum which is received or receivable under any approved or statutory pension scheme.

It is open to the taxpayer to choose whichever relief is of most benefit.

The basic exemption from income tax as outlined above can be further increased by up to €10,000 if the person is not a member of an occupational pension scheme. (This can only be claimed if the person has not made any claims in respect of a lump sum retirement gratuity received in the previous 10 tax years.)

Any amount of redundancy payment or retirement gratuity in excess of whichever exemption applies is liable to income tax.

As mentioned, under the provisions of section 8 of the Finance Act 2011, the maximum lifetime amount that may be paid tax free in respect of a retirement gratuity is, with effect from 1 January 2011, €200,000.